ICICI Lombard IPO: Fairfax, ICICI Bank to sell at least 20% stake

ICICI Bank and Fairfax have stakes of around 63% and 22% in ICICI Lombard. Photo: Abhijit Bhatlekar/Mint

The initial public offering (IPO) of ICICI Lombard General Insurance Co. Ltd will see its founders ICICI Bank Ltd and Prem Watsa’s Fairfax Financial Holdings Ltd collectively dilute a stake of at least 20%, said two people aware of the development.

ICICI Lombard’s IPO will be the first public offering by a general insurance company.

“The IPO is a pure offer for sale. Fairfax has already sold a large chunk of its stake in the company and it will be the biggest seller in the IPO too. Together, both ICICI and Fairfax are going to sell at least 20% stake in the company. Fairfax will sell 13% stake, while ICICI Bank is looking to sell at least 7%,” said one of the two people cited above, requesting anonymity as he is not authorized to speak to the media.

Fairfax has applied to the insurance regulator for a new insurance licence and as a condition it will have to bring down its stake in ICICI Lombard to under 10%, he said.

In May, Fairfax sold a 12.18% stake in ICICI Lombard to a bunch of buyers including private equity firm Warburg Pincus Llc for around $383 million (around Rs2,372.5 crore then). After the transaction, ICICI Bank and Fairfax have stakes of around 63% and 22% in ICICI Lombard.

According to the second person cited above, the selling shareholders expect to raise at least Rs5,000 crore, which would value the company at around Rs25,000 crore, a significant premium to the Warburg round.

The 12% stake sale by Fairfax in May valued the company at Rs20,300 crore.

“The company is expected to file its draft red herring prospectus in the next 10-15 days, with an eye on launching the IPO before the end of the calendar year,” the second person said.

Emails sent on Monday to Fairfax, ICICI Bank, ICICI Securities and ICICI Lombard General Insurance did not elicit any response. Bank of America Merrill Lynch declined to comment.

ICICI Lombard General Insurance is the second insurance company from the ICICI group to go public. Last year, ICICI Prudential Life Insurance Co. Ltd raised Rs6,000 crore in an initial share sale, the first public offering by an Indian life insurer. ICICI Bank sold a 12.63% stake through the IPO, which valued the life insurer at around Rs48,000 crore.

Several insurance companies, including state-owned ones, are queuing up to launch IPOs.

In April, Mint reported that New India Assurance Co. Ltd and General Insurance Corp. of India Ltd (GIC) had hired investment banks to manage their IPOs as the government seeks to pare its stake in the state-run insurers.

The government is likely to raise more than Rs10,000 crore by selling its shares through the public offerings.

State Bank of India’s life insurance unit SBI Life Insurance Co. Ltd is also planning to go public.

On Friday, Mint reported that the insurance regulator had approved SBI Life’s application for the IPO, which seeks to raise as much as Rs7,000 crore, the largest sum by a life insurer in India.

Reliance General Insurance Ltd, the non-life insurance arm of Reliance Capital, is also planning to go public, the company said last month.